11/29/2004 @ 12:00AM

Up on the Roof

Ken Hendricks spent a lifetime trying to win the respect his father never got. With an $850 million fortune made from selling roofing supplies, he’s got it.

Do you know the song The Little Man’?” asks Kenneth Hendricks as he drives a visitor around Beloit, Wis. in his black Jeep Grand Cherokee. The Alan Jackson song is one of Hendricks’ favorites. He plays it, and then plays it again, imploring his guest to listen to the words, a melancholic ode to disappearing Main Street merchants and values, done in by large corporations and discount chain stores on the outskirts of town.

The song may be a bit hokey, but the 62-year-old Hendricks identifies with the underdog. As a kid growing up in nearby Janesville, he sensed the contempt “the country club set” had for his blue-collar family because of his father’s humble job as a roofer.

“They looked down their noses at him,” Hendricks says. “He went to work every single day of his life. That wasn’t good enough? Some kid got to go to a fancy school and that made him different than me? That just sets in your gut.”

Don’t underestimate a chip on the shoulder as motivating tool. Hendricks, a high school dropout, joined his father in the trade and eventually started his own shingle wholesaling business. Today Beloit-based American Builders & Contractors Supply is the largest wholesaler of roofing supplies in the U.S. and among the largest suppliers of vinyl sidings and windows.

“We didn’t invent anything. But even Jesus Christ had a roof, and it probably had to be repaired,” says Hendricks. Last year ABC Supply netted $67 million on sales of $1.8 billion. The sole owner of the privately held company, Hendricks joined The Forbes 400 this year with an estimated net worth of $850 million.

For a rich guy, Hendricks doesn’t surround himself with a flotilla of underlings. ABC has no public relations department; the boss doesn’t even keep a secretary outside his office. He answers his own phone and is quick to hand out his cell number to any of his 4,500 employees who need it. He has no interest in joining a country club and eschews golf, preferring cross-country motorcycle trips. Hendricks rarely uses the corporate jet. When he flies commercial, he goes coach. “Pay an extra $600 to sit up in front of that curtain for three hours?” he laughs.

Before Hendricks came along, the business of selling roofing supplies–asphalt shingles, sheet metal, tiles, rolled roofing for commercial buildings–to contractors was highly fragmented. “Not a lot of others saw that opportunity to take a business that had been local or regional and turn it into a national one. It’s a big vision, and it’s hard to do,” says William Good, executive vice president of the National Roofing Contractors Association.

An aspiring architect, Hendricks dropped out of high school at 17, when his girlfriend got pregnant. He took two jobs, one on a repair truck for Wisconsin Power & Light. While driving around town he kept his eyes peeled for houses with worn shingles. After his shift he’d go back, knock on the door and offer to reshingle the roof that weekend.

Soon he was able to quit the power company job and hire his own roofing crews. He nailed his first big break when a hailstorm hit the central Wisconsin town of Berlin. As always after a hailstorm, roofing contractors descended, jacking up their normal rates. Hendricks took the insurance company’s claims adjuster to dinner and offered to charge his regular rate in exchange for combining all the damaged roofs under one contract. The next time a hailstorm hit a nearby town, he was called back. The work led to contracts to roof military bases and eventually Kmarts. By 1971, not yet 30 years old, he had, he estimates, 500 roofers working for him around the country.

But overseeing dozens of simultaneous job sites kept him on the road for months at a time. For a man with five kids it was an unsustainable pace. He burned out and gave away the business in pieces to his employees. He tried to settle into a leisurely life pursuing a sideline renovating real estate, but boredom set in. “It was like clipping coupons,” he says.

He was already thinking about the need for a national distribution chain. As a contractor running from state to state, he was dealing with dozens of suppliers, none of which could sell him everything he needed. He also knew there was a lot of complacency, waste and room for improvement.

He bought his first three distributorships from Bird & Sons in 1982 and didn’t let up on the buying spree for 15 years. Using a revolving line of credit from Bank of America, Hendricks had 157 outlets by 1997 and a profit of $10 million on $789 million in revenue.

He made it work by negotiating volume discounts with manufacturers and keeping a tight lid on costs. He used to deliver shingles to job sites with renovated trucks instead of buying new ones. He recycles pallets and sells them back to the manufacturers. ABC’s point-of-sales system was built with a $20,000 software package–still the heart of the company’s computer system today.

Hendricks may not have the latest customer-relationship software, but he does have an understanding of what his customers need. “I’ve been up on the roof. Iknow what those guys go through. My whole life has been about making that profession respectable.”

ABC gives its customers–mostly small to midsize contractors–flyer mailings, sample packs of shingles and free seminars on how to use new materials; it even makes yard signs to help contractors advertise. Hendricks’ wife, Diane, started her own company to sell low-cost insurance policies to contractors. “If our customers do well, we do well,” says Hendricks. Same goes for his workers. Employees are routinely flown in to Beloit for educational programs, given hammers and nails and taught how to do their customers’ job. The best-performing locations will split a $400,000 bonus at the end of the year. A good regional sales manager can make $350,000 a year.

“I had 2 suppliers when I was in business. Now we have 10 to 12 vendors lining up at the door,” says Jim L. Gann, who sold his 3 Alabama roofing supply outlets to Hendricks in 1990, when they were doing $4 million in sales, and joined the company as a regional manager. Today those outlets are doing $28 million in sales.

But the bank loans that fueled this growth were getting burdensome. In 1997 the company refinanced them with a ten-year $100 million bond paying 10.6%, a steep rate even at the time. “It was a leap of faith,” says Kendra Story, Hendrick’s daughter and ABC’s financial officer. The acquisitions put sales over $1 billion the next year, but interest costs pushed ABC to a $2.6 million loss in 1998, only the second unprofitable year in its history.

It’s always been a family-run company. Five of Hendricks’ seven children work for ABC. But in 1998 Hendricks recruited outsider David Luck, the head of Bridgestone/Firestone’s 1,600-store retail chain, to be ABC’s president. In 1999 the company eked out a profit of $6.6 million on sales of $1.2 billion. While sales have grown 50% since then, overhead has not, and the company was able to pay down debt. It retired the bond issue this year.

The biggest threat now is competition from the big hardware chains. Hendricks’ answer: “We’ve got 256 different shingles by brand, weight and color. Home Depot’s not going to waste the shelf space. It’s a low-margin business.”

Robert Shannon is a contractor in Mineola, N.Y. with 50 roofers working for him. He’s the kind of customer ABC and Home Depot crave. Some bad customer-service experiences soured him on Home Depot, and he’s loyal to ABC. “They’ve delivered shingles overnight from Boston, stuff I needed the next day,” says Shannon. “No other supplier does that. They understand if you have nine crew members standing around with nothing to do, that costs money.” It helps to know the business.